| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | 0.1% | 0.0% to 0.3% | 0.1% | 0.3% |
| Year over Year | 2.4% | 2.3% to 2.6% | 2.4% | 2.7% |
Highlights
Producer inflation in Japan decelerated to a 20-month low of 2.4% in December, as expected, after being steady at 2.7% in November. Easing domestic rice supply shortages have cooled farm produce prices while fuel prices have trended down amid slower global demand and ample crude oil supply from the OPEC and other major producers. Gasoline prices also slipped at the end of the year as the government provided temporary subsidies to make up for lost refinery revenues that were caused by the elimination of a decades-old top-up gasoline tax.
The 2.4% year-on-year increase in the CGPI is the slowest since 1.2% recorded in April 2024. Looking ahead, however, Japan's import costs are unlikely to ease much as the yen remains depressed against the dollar, the dominant settlement currency in global trade.
Details:
Japan Dec corporate goods (producer) prices +2.4% y/y (Nov +2.7%); median forecast +2.4%
Japan Dec producer inflation annual rate hits 20-month low, slowest since +1.2% in Apr 2024
Japan Dec producer prices +0.1% m/m, 4th straight rise (Nov +0.3%); median forecast +0.1%
Japan Dec CGPI m/m rise led by non-ferrous metals, agri products, food/beverages, production equipment
Japan Dec producer inflation y/y rise led by easing but still high farm produce prices (+26.8% vs. Nov revised to +29.8% from +30.1%)
Japan Dec CGPI: key energy prices continue falling; crude oil/coal products (-8.6% vs. Nov revised to -2.5% from -2.6%)
Japan Dec CGPI: non-ferrous metals +22.1% in Dec vs. +14.9% in Nov amid copper shortages
Market Consensus Before Announcement
Japan’s corporate goods price index (CGPI), or producer inflation, is expected to rise 2.4 percent from a year earlier in December, slowing from 2.7 percent in November, when higher food and beverage prices and gains in agricultural products, including elevated rice prices, drove the overall trend.
Upward pressure from food prices, including rice, and persistent gains in non-ferrous metal prices is expected to continue in December. The weaker yen against the dollar compared with a year earlier is also seen pushing up prices of imported goods across the board. Farm product prices rose 30.1 percent from a year earlier in November, easing from a revised 31.1 percent in October.
Still, weaker crude oil prices and the revival of domestic gasoline subsidies, following the government’s decision to abolish the provisional gasoline tax rate, are expected to cap overall price gains and slow the uptrend from the previous month.
On a month-on-month basis, the CGPI is projected to rise a modest 0.1 percent in December, marking a fourth straight monthly increase, after a 0.3 percent gain in November and a revised 0.5 percent rise in October.
Definition
The Producer Price Index (PPI) is a measure of the average price level for a fixed basket of capital and consumer goods paid by producers. Analysts look to the PPI for early signs of inflation in the production process.
Description
The producer price index focuses on the prices of goods transacted between companies. It was previously known as the corporate goods price index. The index reflects the price level for the supply and demand of individual industrial goods. This index is calculated by the BoJ Research and Statistics Department. Three indexes are contained in this release - the domestic producer index, the export price index and the import price index. It is the domestic index that market players follow. The PPI comprehensively tracks input price pressures; however, the PPI has a track record of increasing and not necessarily feeding through to the CPI because of weak demand. But if an increase in the PPI is followed by a rise in the CPI, concerns about inflation may prompt the Bank of Japan to raise interest rates.